Current Take: COVID-19
The COVID-19 crisis had undoubtedly caused major shifts in your industry. Your competition has surely shifted, with some businesses ceasing to exist and others pivoting to different products and different channels. Take the opportunity to see if a niche has opened that you can fill. Then you may find that there’s opportunity to adjust your pricing based on your new value proposition.
Making a Decision Around Price
When pricing your product, it’s essential to include the cost of producing your product or delivering your service as well as contributing to fixed expenses. In addition, you’ll want to factor in the competitive landscape.
- What are similar customers to yours willing to pay your competition for products and services similar to yours?
- Can you improve the perceived value of your product/service?
Using the Competitive Analysis Worksheet
The Competitive Analysis worksheet allows you to compare the price and value of businesses similar to yours. The results will help you evaluate the right place for your business in the market with respect to your competitors.
This example examines the preschool competitive landscape. The x-axis measures price, increasing as you move right, and the y-axis measures value, increasing as you move up.
Example Price and Value Comparison
- My Favorite School is right in the middle between value and price.
- Play and Jump has the same perceived value but at a higher price.
- Claps and Smiles charges a higher price and has a higher perceived value.
- Stars of Today has a higher perceived value and a lower price.
As a business you generally want to have a high perceived value represented in Quadrants 1 and 2, with the highest possible price allowable in Quadrant 2. If there are competitors with your same perceived value but higher price, aim to move there and articulate your business's value to your clients.
Revisiting price is a dynamic exercise that should happen with changes in consumer demand/behavior, existing competitors and supply chain costs. Experiment with your pricing model and look for ways to increase perceived value without increasing cost. Next, think through how you collect payments to ensure there are no barriers to collecting cash generated by sales.
Build your own competitor analysis
Compare the price and value of similar businesses to gain insight into your place in the market.Download the worksheet
Evaluating your pricing strategy should be an ongoing exercise and best practice in managing your business. Revisit it when there are changes in consumer demand, number of competitors in the market and supply chain costs. Experiment with your pricing model; if you communicate your positioning and your added value clearly to your customers, you may see the positive impact on your cash flow.
For Informational/Educational Purposes Only: The author’s views may differ from other employees and departments of JPMorgan Chase & Co. Views and strategies described may not be appropriate for everyone, and are not intended as specific advice/recommendation for any individual. You should carefully consider your needs and objectives before making any decisions, and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results.